Finally, FBR submitted the report to Supreme Court regarding taxes on mobile phone balance. All Pakistanis are still waiting for the response from telecom sector and relevant institutions to obey the SC order of giving Rs 92 balance on the 100-rupee card. In this regard, the Federal Board of Revenue (FBR) has submitted its detailed response to the composition of taxes deducted from pre-paid top-up cards in the Supreme Court of Pakistan.
On May 8, the Supreme Court had ordered the FBR as well as federal and provincial governments to submit comprehensive report and answers in order to explain multiple taxes being deducted on pre-paid cellular scratch cards which are about up to 42% of the card’s total worth.
In the response, they told that for every cellular charge, 5.5 % was deducted as a withholding tax, 19% as sales tax and another 10% as services charges. On that explanation, the court had remarked: “Is this not exploitation. This is an illegal way to get money from people.”
The FBR in its response today justified the levying of withholding taxes on mobile calling cards, saying that due to a lack of documentation of economic transactions in developing countries, the tax base and revenue collection is low, which is why “withholding taxes are the main source to broaden the tax base and generate revenue.”
“A person has the right to claim the refund if his annual tax liability is less than the tax withheld,” it added.
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The FBR responded the practice is “prevalent across many countries” and claimed that Pakistan still has lower taxes charges in the telecom sector than other countries such as Bangladesh, Indonesia, Malaysia, Thailand, and Turkey.
“Mobile phone usage is still cheaper in Pakistan than many countries,” the FBR’s response stated.
According to FBR, the rate of withholding tax charged on pre-paid cards was actually reduced from its peaks of 15% in 2013-14 to 12.5% for the fiscal year 2017-18.
Furthermore, FBR also offered a whole breakdown to the SCin which it explained all the deductions made to a 100-rupee mobile calling card via an illustration.
Whenever a consumer loads a 100-rupee mobile card, 12.5% of the total amount takes away as adjustable withholding tax, while 10pc of the entire goes to the telecom company as service charges.
The 19.5 sales tax also kicks in, as Telecom Company taking its cut. However, it is applied just to the telecom company’s 10% rather than the whole 100-rupee card.
Well, currently, the consumer is left with Rs76.94 of which the government charges 19.5pc sales tax (Rs 15). It means consumers are paying the Rs 15 to the government for making calls and sending SMS.
Now at the end, according to the FBR calculation, the net amount left with the consumer for his total consumption on a 100-rupee charge is Rs61.93.
